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Ruling
Subject: Assessable income
Question
Is the portion of your award of assistance identified as 'loss of wages' assessable income?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 2011
The scheme commenced on:
1 July 2010
Relevant facts and circumstances
You received an award of assistance under the Victims of Crime Assistance Act 1996 in July 2010.
A portion of this award is specified as loss of wages.
You state that you have not included this amount in your 2010-11 income tax return.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Detailed reasoning
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
An amount paid to compensate for loss generally acquires the character of that for which it is substituted (Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; (1952) 5 ATR 443; 10 ATD 82).
Taxation Determination TD 93/58 outlines the circumstances under which the receipt of a lump sum compensation or settlement payment is assessable as ordinary income. TD 93/58 states that where the compensation payment is for loss of income, the amount is assessable as ordinary income. Where a portion of a lump sum payment is identifiable and quantifiable as income, that portion of the payment will be assessable.
You have provided a copy of the compensation payment that specifies an amount paid for loss of wages. You were also reimbursed for expenses actually incurred, counselling and financial assistance. Accordingly, only the amount paid to compensate for loss of wages is assessable as ordinary income under subsection 6-5(2) of the ITAA 1997.